Welcoming the recent move by India and Pakistan to initiate steps to improve business and trade ties, Isabel Guerrero, World Bank Vice President for the South Asia region, said this is crucial for the struggling Pakistan economy.

“I think it (improved Indo-Pak trade) is crucial. I am so happy to see that this is happening, because it could not have come at a better moment,” she said.

Pakistan’s macro-economic situation, where they have a low tax revenue and high expenditure, budget deficit ... the only way for Pakistan to get out of it is to grow, she added.

Observing that Pakistan is strategically located between two Asian economic giants, India and China, which are the fastest growing countries in the world, she said why Pakistan is not having growth is a big question now.

“Trade is the answer (to this question),” she said. “If Pakistan can have more trade with India, it would have a huge impact ... first of all in the bilateral relations, but also for Pakistan’s growth. That is the answer to get out of the low equilibrium through high growth,” Guerrero said.

Right now, she said, there is trade happening between Pakistan and India, except that it goes through Dubai.

As a result of which the transport cost incurred are huge, she said, adding that this would disappear with the normalisation of trade relationship between the two countries.

The World Bank official welcomed recent decision of the Pakistan Cabinet to do away with the negative list.

So from next year, the number of Indian products that could be traded with Pakistan would jump three times from the current about 2,000 to some 6,500 items. The objective is to double bilateral trade in three years, Guerrero said.

“I think, it would be more than that if all these things are implemented,” she added. Guerrero recommended both India and Pakistan to improve on the logistic facilities to enhance trade and commerce between the two countries.

Secondly, the two countries can cut short the large number of regulations that are required for the businesses to comply with, the World Bank official said.

She also recommended increase in trade in power sector both in transmission and generation - from one country to the other. “Power is one of the main constraints to growth in Pakistan. So there could be some power sharing like Nepal and India or Bhutan and India,” she said.

Guerrero also suggested easing visa regulations between the two countries, saying it is essential to improve ties.

The World Bank is currently in the process of conducting a study on the impact of improved India-Pak ties on Pakistan’s economy.